In late September, the FTC withdrew from a memorandum of understanding (MOU) with several other federal agencies, including the U.S. Department of Labor and the National Labor Relations Board. The MOU’s ostensible purpose was to allow those agencies to help the FTC analyze the effect of proposed mergers on labor markets. The FTC offered no reason for withdrawing from the MOU, leaving many observers scratching their heads. After all, the FTC had signed the MOU only a month earlier, and most of the MOU’s provisions were supposed to help the FTC itself.
The real explanation, unfortunately, is no mystery, and it can be found in the timing. The FTC announced the MOU only days after opening a high-stakes trial in its effort to block a merger between the grocery chains Albertsons and Kroger. And it withdrew the MOU on the same day briefing in that case closed. This timing shows the MOU’s real purpose was never to improve the FTC’s labor-market analysis in general; it was to bolster the FTC’s labor-market theories in one case.
The FTC’s interest in labor markets is of recent vintage. In 2021, spurred on by antitrust academics, the Biden administration concluded that labor law had failed. Longstanding policy aside, the administration argued labor markets were still too dominated by large employers. Employers had entrenched themselves in local markets and driven down wages through their sheer size. Employers were simply too concentrated to counteract with collective bargaining. The only answer, then, was to reintroduce competition policy through vigorous enforcement of antitrust law.
No agency responded to that call with more alacrity than the FTC. The FTC published multiple enforcement policies targeting alleged unfair competition in labor markets. It wrote an unprecedented rule banning nearly all employee noncompete agreements. It signed multiple MOUs with federal labor agencies, including the NLRB and the Department of Labor. And most visibly, it filed a high-profile lawsuit to block the Albertsons–Kroger merger.
The lawsuit marked an unprecedented incursion into labor markets. The FTC’s theory was that the merger would reduce competition in a narrow union retail food labor market defined by a single union—the United Food and Commercial Workers Union (UFCW). The UFCW represented workers at both Albertsons and Kroger. The union asserted that historically, it had been able to play the companies off one another by timing its agreements to expire at the same time and then “whipsawing” the companies with strikes or threatened strikes. That tactic supposedly allowed it to extract higher wages and more benefits for its members. But if the companies merged, the union claimed, it would have less leverage. The FTC accepted that theory without evidence or, really, much analysis. So, according to the FTC’s theory, the merger would damage the workers’ bargaining power.
This theory is, to put it mildly, adventurous. So to support it, the FTC has pulled out all the stops. Two days after the trial opened, the agency announced that it had entered yet another MOU with federal labor agencies. Unlike prior MOUs, this one focused solely on merger reviews. It said that when conducting reviews, the FTC would rely on the “expertise” of labor agencies. In particular, it would use those agencies’ expertise to help it define the relevant labor markets. And to give that commitment substance, it pointed to data the labor agencies published on their websites. This data included wage surveys, occupational information, and enforcement records. The data would inform the FTC’s merger analysis by helping it first draw boundaries around a labor market and then figure out whether a merger would reduce competition within that market. In other words, the data would sharpen the FTC’s analysis with the expertise of its sister agencies.
That commitment, however, was short lived. The Kroger–Albertsons trial wrapped up on September 19, and post-trial briefing closed on September 27. The same day, the FTC announced that it was withdrawing from the MOU. Evidently, the FTC was no longer committed to analyzing labor markets using a defined set of public records. Instead, it would police labor markets under its own merger guidelines—guidelines written without the labor agencies’ supposed expertise.
This about-face has two possible explanations, neither flattering to the FTC. The first is that no matter how much expertise one has, wisdom sometimes comes late. For better or worse, Congress decided almost one hundred years ago to address imbalances in the labor market through collective bargaining. And collective bargaining is inconsistent with—in fact, antithetical to—the free-market ethos that animates antitrust law. So it makes no sense to use antitrust law to “balance” an already deliberately imbalanced market. Maybe at this late date, the FTC finally realized the illogic of its own position.
But more likely is the second explanation: self-interest. The MOU’s one potential benefit was transparency. The MOU pointed to several concrete data sets, which were equally available to everyone involved. So theoretically, a private company could review the data itself and figure out how the FTC would define the relevant labor market. That information could have helped the company design a merger to avoid problems with the FTC.
But that’s exactly what the FTC wanted to avoid. The FTC has no incentive to give companies regulatory certainty. Its incentives are instead to give itself maximum flexibility. With no fixed data set, it can define novel labor markets ad hoc, just as it did in the Kroger–Albertsons case. It does not have to construct a labor market through neutral, publicly available data sets. It can instead attack a merger based on a novel theory it cooks up for one case only.
At this point, one could fairly ask why the FTC entered the MOU in the first place. If it didn’t want transparency, why ever commit to it? The answer again pays no compliments. The agency likely signed the MOU only to give its case against Kroger and Albertsons the veneer of expertise. And as soon as that veneer was no longer useful, the FTC discarded it. It immediately returned to a position of maximum flexibility and minimum transparency. And while that position may help it win its next labor-market case, it will do nothing to promote the rule of law.
We can only hope that Congress, the courts, or both bring that point to the attention of the FTC.
Alex MacDonald is a management-side labor and employment attorney in Washington, D.C. G. Roger King is senior labor and employment counsel at HR Policy Association. Mr. King served as an expert witness on behalf of Kroger and Albertsons during the recently concluded FTC trial challenging the merger.
